by Agrimoney.com
The soaring premium in arabica coffee beans over their robusta peers may remain steep even after the rally which has driven prices to multi-year highs fades - an event on the cards for the second half of this year.
Investors typically cite supply hiccups in arabica-producing countries, and notably Colombia, for the doubling in the premium of the bean, which is traded in New York, over the robusta coffee traded in London.
"The current hunger for higher quality arabicas and smaller interest for robustas is usually attributed to reduced supply in key Latin American producers of mild washed arabicas," leading coffee analyst Carlos Brando said.
New York arabicas have jumped by 160% over the past two years to hit a 34-year high of 277.30 cents a pound on Friday, compared with 54% rise to $2,335 a tonne, equivalent to 109 cents a pound in London robustas.
Quest for quality
However, investors may be ignoring the impact of changes in coffee drinking habits favouring arabicas, typically considered higher-quality beans, over the robustas used largely in instant coffee.
"The actual reason may lie on a change in the profile of consumption, with increased demand for better products," Mr Brando said, citing in particular a move upmarket in domestic consumption.
The quest for quality was trickling "down from the specialty coffee niche market to the more mainstream segment of single-serve consumption at home".
Indeed, the acceptance by New York's Ice exchange of Brazilian arabica beans for delivery against its futures from 2013 "may be yet another indication of this new reality", Mr Brando said, citing the "growing market for consistent quality, differentiated coffees".
'Lacking a crisis'
Robusta beans, of which Vietnam is the top grower, have traded at a notable discount since the late 1990s, although the shortfall has tended to remain at roughly the half current level of more than 60%.
However, even arabicas' spell of heady performance may be about to wane, Rabobank analysts said, noting "some bearish indicators in the market".
"Roaster buying has faded of late, recent gains have been speculator driven, and supply from Central America has been spurred by prices, and is very strong," the bank said.
The market was lacking the "major crisis, be it frost or labour issues", that sent prices to record highs in 1977 and 1997.
Furthermore, production in Brazil looked set to be high in 2011-12, for an "off" season in the country's two-year cycle of higher and lower harvest seasons, "and we believe this will result in easing prices in the second half of 2011".
Prices of arabica, which Rabobank late last year rated as a top buy, stood 1.0% higher at 277.30 cents a pound for New York's best traded May contract, at 10:30 GMT.
London robustas for May were 0.8% higher at $2,382 a tonne.
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